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  • Writer's picturemec. Karol Dygdoń

Family foundations as a new method of capital accumulation

Updated: Aug 9, 2023

On 22 May 2023, the Act of 26 January 2023 on family foundations ( Journal of Laws of 2023, item 326) entered into force, introducing into the Polish legal system the institution of a family (private) foundation - well-known to the legislation of other European countries and appreciated in many foreign markets, but not available to a wider extent for entities with Polish capital, due to difficulties related to the transfer of assets to foundations established under foreign legislation.

Objectives of family foundations

The function of family foundations is to accumulate family assets, to increase them and to ensure an effective succession that protects the assets from excessive and economically unreasonable division, which is particularly the case for so-called family businesses. The second objective of family foundations is to secure the financial needs of the founder and the beneficiaries, which can only be natural persons and public benefit organizations. Most often, beneficiaries will be the founder's family members, although nothing prevents the founder from designating third parties, although this will not be an optimal tax solution, as will be explained later in this article.

A family foundation has a legal personality, but - which is an exception in the Polish legal system - it is a shareless structure. Thus, in the situation of financial problems of the founder or beneficiaries, a family foundation cannot be seized and debt enforcement cannot be carried out from it. Therefore, it is a safer form of capital accumulation than, for example, capital companies.

The foundation's functioning is determined by the statutes prepared by the founder, including the purpose, duration of the foundation and allocation of assets. It also regulates the principles of the functioning of the organs and the method of determining the beneficiaries, in which the founder has a great deal of freedom - beneficiaries may be, for example, the founder's descendants with a university degree. The mandatory bodies of a family foundation are the Board of Directors and the Beneficiaries' Assembly, while the optional body is the Supervisory Board. The founder transfers assets to the family foundation to cover the founding fund with the value specified in the statute, not lower than PLN 100,000, however, these do not have to be exclusively monetary funds - the aforementioned amount covers the equivalent of the entire contributed assets. The foundation's assets will mainly be shares (stocks) in family companies, cash and property.

Family foundation and the right to a legitimate portion

One of the greatest benefits of family foundations is the modification of the general rules related to inheritance law. If 10 years pass after the transfer of assets to a family foundation, there will be a complete exclusion of inheritance law, including statutory and testamentary succession. Consequently, only the rules set out in the family foundation's statute will determine what happens to the contributed assets.

Importantly, when calculating the legitimate portion, the foundation fund of the family foundation contributed more than ten years backwards from the opening of the inheritance is not added to the inheritance, unless the family foundation is an heir. This leads to the protection of the assets from people with family ties to the founder, but who do not show an interest in the family and the development of the family assets. Elimination from the succession of the contributed assets after the abovementioned ten-year period is especially important from the perspective of preserving the integrity of the shareholding in the family business, as the institution of legitimate portion may be a significant barrier to preserving the condition and integrity of the organized group of assets.

Favorable tax solutions

As a rule, the foundation is free from CIT to the extent of the so-called permitted business activities indicated by the legislator in Article 5(1) of the Family Foundation Act, including in particular:

1) disposal of property - insofar as such property has not been acquired only for the purpose of further disposal, however, the above limitation does not apply to rights from companies, investment funds, as well as securities and other rights of a similar nature;

2) renting, leasing or providing property for use on any other basis;

3) joining and participating in commercial companies, investment funds and entities of a similar nature, either domestically or internationally;

4) acquisition and disposal of securities, derivatives and rights of a similar nature.

Income earned by a family foundation from the rent of property, the sale of financial instruments, shares and dividends received from companies in which the family foundation holds shares, is not taxed with CIT, even if the family foundation earns such income as a result of activities carried out on a permanent basis. The exemption also includes capital gains tax (the so-called "Belka tax"). Therefore, as long as the income received by the family foundation is not distributed to the beneficiaries (or the founder), the taxation of such income is 0%. The above solution supports one of the main goals of the family foundation, i.e. the accumulation and increase of the capital accumulated therein. At this point, it should be pointed out that the favorable income tax solutions apply only to the categories of economic activity listed by the legislator - in other cases, income from economic activity will be taxed with CIT at the rate of 25%.

Perspectives for the future

The idea of a family foundation is to transfer all or most of the family assets with the objective of multiplying them and planning intergenerational transfers, including ensuring effective succession among individuals of different ages and generations. The favorable solutions adopted by the Polish legislator should lead to a dynamic growth of family foundations in the coming years.


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